Why are prop firms allowed to offer so much leverage vs. retail?


3 0
Dear all,

I am thinking of going from retail to a proprietary trading firm. One thing worries me however: how can prop trading firms offer much higher leverage than the maximum authorized by the T-Reg (i.e. what is usually offered by retail brokers)???

I am afraid to deposit my $10k (which give me up to $500k buying power!) and have the S.E.C. shut down the prop trading firm for offering brokerage services and high leverage illegally to clients.

Could any of you guys enlighten me on:
1. Whether there are many cases of SEC closing prop trading shops for offering illegal leverage,
2. Why prop trading firms have the right to offer so much buying power, i.e. how are they legally different from broker,
3. I have seen several prop trading firms set up in a tax havens – is it to avoid regulation on the leverage it offers?
4. I also saw many of those firms offering market access to US markets – but barring US citizen from using their services… Why?

Thank you so much for your invaluable help!
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